A public disagreement has erupted between the Federal Government and the Chairman of Air Peace, Allen Onyema, over the likely impact of the Nigeria Tax Act reforms scheduled to take effect in January 2026.
The dispute follows warnings by Onyema that the proposed tax changes could severely destabilize Nigeria’s aviation industry. In a recent interview, the Air Peace chairman argued that the reforms would effectively reintroduce a 7.5 per cent Value Added Tax (VAT) on aircraft imports, engines and spare parts, charges that were suspended in 2020 to support struggling airlines.
According to him, this additional burden, combined with prevailing high interest rates of between 30 and 35 per cent, could trigger a sharp rise in domestic airfares.
Onyema claimed that an economy-class ticket currently selling for about ₦350,000 could increase to over ₦1.7 million if the reforms are implemented as planned. He further warned that local airlines could collapse within three months due to rising operational costs and limited access to affordable financing.
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The Federal Government, however, has rejected these claims. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, described Onyema’s projections as misleading and exaggerated. Oyedele stated that the reforms are intended to ease, not worsen, the tax burden on airlines and other businesses.
According to him, the Nigeria Tax Act proposes the removal of the 10 per cent withholding tax on aircraft leases, a cost that has long weighed on airline operators. He also explained that the VAT framework under the reforms would be “VAT-neutral,” allowing airlines to fully recover VAT paid on assets and services.
In addition, multiple sector-specific levies are to be harmonized into a single development levy to reduce administrative complexity.
Oyedele maintained that even under a worst-case scenario, a ₦350,000 ticket would rise only marginally to about ₦376,250, far below the figures suggested by Onyema.
Despite the government’s assurances, anxiety remains within the aviation sector. Industry stakeholders, including the International Air Transport Association, have raised concerns about possible treaty violations and the timing of the reforms. Reports of opposition within the House of Representatives and potential legal challenges further highlight the uncertainty surrounding the policy.
